Corbion N.V. (CRBN) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to the Corbion Capital Markets Day 2022, and I'm delighted to see so many of you have shown up today. I hope the number of people on the webcast is as big as a minimum, so thank you all for joining. A little bit of logistics to start off with. For those of you who are listening in through the webcast, the webcast will run approximately from 10:00 till 12:00, after which the people in the room here will have lunch. And after lunch, we'll get a chance to meet the broader team within Corbion. But the webcast will close approximately at 12:00. By the way, on the webcast, you will also get a chance to participate in the Q&A. The Q&A will be after Olivier, our CEO; and Eddy, our CFO, have presented. So near the end of the webcast, you will also get a chance to put your questions in. The slide deck that we'll present today, you can also find on the Corbion website under corbion.com/investor relations/financial publications, you'll find that slide deck. But it, of course, will also run simultaneously on the webcast. One request to the people in the room here, could you please check if your phone is on silent to avoid any disturbances from that? For the record. My name is Jeroen van Harten. I'm Head of Investor Relations, but not for long because next to me is [ Peter Cassis ], who will be my successor from, well, literally today. So with that, I'd like to hand over to [ Peter ] for -- who will take you through more of the logistics of today.

Thank you, Jeroen, and good morning to all of you. As Jeroen said, my name is [ Peter Cassis ], successor of Jeroen as Director of Investor Relations. I would like to thank Jeroen actually for working together over the past couple of years. Let me now continue with the objectives actually for today. So today's objective is actually to provide an update of our Advance 2025 strategy. We will provide an overview of the growth opportunities and the strategic approach as well as the financial outlook. It's also an opportunity to meet the executive team and some senior leaders of the business. After the introduction, I will hand over to Olivier Rigaud, our CEO, and he will present a strategy update; followed by Eddy van Rhede van der Kloot, our CFO, and he will provide the financial update. The presentations will be followed by Q&A. After lunch, we've organized 4 carousels. These carousels have the aim to bring the strategy to life and to also have interactive discussions with the wider team. As indicated, the carousels will be led by ExCo members and some senior leaders of the business. SFS will be presented by Andy, David, Olivier and Jennifer. LAS will be presented by Marco, Eddy and Thomas. And Thomas is CEO of TotalEnergies Corbion, which is our PLA joint venture. Algae Ingredients is led by Ruud, Aurélie and Tim. And last but not least, Innovation is represented by Marcel, Jacqueline, Diana and Menno. I would like now to hand over to Olivier.

So good morning, everybody. I'm very happy to welcome you to this Capital Market Day and see you all face-to-face primarily since what happened last time when we presented our Advance 2025 strategy back in March 2020. This was 1 week before the lockdown. So I think very glad to see you in person. So before starting this presentation, we'd like to start with a short video to present our company, and I will move on following that video. [Presentation]

Purpose is at the start of everything we do. We preserve what matters. And why is it so important, why is it so crucial? You all know about food shortages, climate crisis, fossil fuel scarcity, pollution, environmental degradation, disease outbreaks, loss of biodiversity, and I could even mention more. So we live in a time that is just screaming for changes. We're just out of the COP27 in Egypt, and we still struggle to get our act together. We struggled to take a bold decision. And according to the latest IPCC report, we are now already at a 1.1 degree global warming. And the latest report predicts up to 2.5% -- 2.5 degrees, sorry, by 2050. So it's so important that we take the right action. And we believe, at Corbion, we can have an influence there. So now let me explain why. To have an impact at Corbion, we decided to align our entire business from innovation to portfolio choices and capital investment behind 3 out of the 17 United Nations Sustainable Development Goals, the 2, the 3 and the 12, zero hunger, good health and well-being and responsible consumption and production. And today, over 60% of our sales is already aligned behind these 3 goals, but 100% of our innovation projects are aligned behind these goals. And we can already claim some very important contribution, be it with our natural product preservation to help reduce food waste, improve health but also with our new lactic acid circular technology, which can help us reduce our carbon footprint by 19%. A lot of you do already know a lot about Corbion, so you will be familiar with this identity card. However, I'd like to highlight a couple of important numbers and features there. First, that over 75% of our business is about food and pharma. The second is that our largest market is in the United States, and this is world's largest food market. And third, we are the only global lactic acid producer with [ plants ] in all geographies, and this is giving us the best cost footprint but also the best supply reliability in any region. And I think these 3 key elements are really key to the resilience and to the differentiation of our business model. And finally, our business does rely on a unique technology platform, fermentation. So at Corbion, we'd like to describe ourselves as a fermentation powerhouse. And why is fermentation so exciting? So I'd just like to start with a couple of very small questions, a small quiz. Do you know how many microbes you do have on and in our own bodies? Does someone has a clue or has an idea? So we have over 100,000 billion. So this is just, I mean, impressive. And the vast majority of these microbes are very useful. They are helping us digest our food, build our immune system, produce vitamins. Do you know as well out of all the living organisms on earth that over 95% will consist of microbes? So from bread to salami, from beer to kefir, every culture has its own specialties and fermentation. Therefore, it's as ancient as humanity itself. So without fermentation, our daily menu would be a lot more boring. And when you speak about lactic acid bacteria, they are present in our bodies, but they are also used in the production of yogurt. So our current knowledge of lactic bacteria has been nurtured over decades in order to provide better functionality, better yield and better scalability. So this is the model we want to replicate with our core competencies to natural food ferments and to algae. So what makes us unique in our entire ecosystem? Starting as a fermentation powerhouse, but fermentation on its own wouldn't be sufficient. You will need the ability to build up and scale up industrially in a sustainable way associated with the applied science, the microbiology expertise, integrated to a go-to-market organization with formulation, application and functional blending knowledge. And these are the key success factors to create value from fermentation. And as I previously said, we are actually doing exactly the same to both SFS, LAS and as well with Algae Ingredients. As I said in my introduction, we launched Advance 2025 back in March 2020, and I'm very pleased with the strong delivery to date. And no need to say that we've been through really rocky times since March 2020. As we are midway today to our Advance journey, this is a great opportunity to share with you progress, but moreover to update you on the key value creation initiatives going forward. So let me sum them up in some key highlights. So these are the key highlights of today. We've made significant progress in delivering Advance 2025 over the last couple of years. Based on the current momentum and our confidence in the future, we are raising our net sales growth to 5% to 8% per annum. We are introducing a new metric, an adjusted EBITDA growth target for the period '23-'25 of 15% to 20%. We have initiated the divestment of our emulsifier noncore business, and we will create a new reporting segment for Algae Ingredients as we see a fantastic growth opportunity in that area. And finally, we are actively managing down our leverage, going forward. These are the key messages we wanted to share today. So let me start with the progress made in our Advance 2025 strategy. A quick snapshot on delivery with a key success as a turnaround on sales growth with a strong acceleration, reflected by a CAGR of 15% over the first 3 years, this associated with the strong absolute EBITDA growth. And this was achieved in a highly volatile environment that you all know, so no need to expand more on it today. In that period, we also invested strongly in additional capabilities, application labs, consumer insights and in capacity across our plant network in a new secular lactic acid plant in Thailand. We also added 2 bolt-on acquisitions, 1 in Brazil, and 1 in Mexico, to roll out the successful U.S. SFS model into Latin America. During the period, we also increased substantially the value of our commercial pipeline, critical to maintain the current sales momentum in the future. We fully executed our 'manage for exit' strategy during the first year of Advance 2025. And more recently, we've initiated the divestment of our emulsifier noncore business. The whole portfolio restructuring will be completed with that divestment. We've also reached breakeven for our omega-3 Algae business in June this year as anticipated, following a major R&D innovation breakthrough massively improving our production yield. And last but not least, most recently, only a couple of weeks ago, we aligned our science-based target to the 1.5 degree, making us some of the first 1,500 company in the world, having Science-Based Target approved in line with a 1.5-degree global warming. This is something we are very proud as a company, and this is reflecting our strong commitment to sustainability. So let me expand on this and how do we intend to raise the bar on sustainability. First, amongst the many metrics we are tracking and working on, we are raising the 2030 target, so the dark blue line here. Starting with revenue aligned with SDGs, we are moving from 80% to 85% of our revenue by 2030. The second, the CO2 reduction is now aligned with the 1.5 degree, as I just mentioned, and we're going to measure the absolute number instead of the per ton metric. Third, on life cycle assessment, it was about 75% and will now be 100% by 2030. And last, on social value assessment, it was about 40%, and we're also moving it up to 100%. And I'd like to expand a minute on the social value initiatives as we believe at Corbion that social sustainability should have and will have an increasing importance, going forward. Social value is recognized as the least quantifiable part of sustainability, but we can have a significant impact there as Corbion on our workers, on our communities and on users. Now to wrap up this section and highlight the key drivers of value creation going forward, I will deep dive into the 3 business units: SFS, LAS and now Algae Ingredients as well as our Incubator. And you will later on have the opportunity to discuss some of the drivers there with the team during the carousel session this afternoon. So let's start with SFS, our largest business unit, and let's start as well with a short video. This is about Bimbo, the largest bakery company in the world and one of our key partners. [Presentation]

Just to add to that video, we're just particularly proud that we've just been awarded the Supplier of the Year award only a few weeks ago, but really, this came just after we taped that video. But even more important that we are their first supplier ever to have been awarded in 2 different regions, North America and Central America. And I think this is a great testimony of the recognition from our key player in the food world, but also about the intimacy we've been able to build together over the years. So let's start with a short recap of SFS key numbers and highlight. SFS represents the largest part of Corbion, 63% of our core portfolio and growing fast. We delivered a strong CAGR of 13% over 2022 period, of which 6% was volume and mix. And our business in SFS is centered around two major legs, being natural food preservation and functional systems, with an aligned approach to replace synthetic and artificial ingredients by natural alternatives. Both legs plays around food waste reduction by preserving food, extend shelf life and keep product fresher, tastier for longer. We've been outperforming our competition over the last 3 years in SFS with a very strong, as I said, organic sales growth and a CAGR of 13%. And the volume/mix growth of 6% was much higher than our initial underlying ambition of 3% in the Advance strategy plan. Next to this, we've been lately very successfully passing on input costs through price increase to the market. But during the period, we also made significant progress and investment for growth. First, in new application labs, improving our footprint in [ new ] America but also building application labs in Brazil, in Mexico and in Asia with a brand-new application lab in Shanghai and doubling our space in Singapore. We also extended our geographical footprint with this 2 bolt-on acquisitions in Brazil and Mexico. And finally, we strengthened our organizational capacity. And this resulted, as you can see there in the slide, in a much enhanced project sales pipeline, improving by 40% from EUR 150 million to EUR 210 million this year. And it is quite crucial to continue the sales momentum, going forward. Next to that, we launched 4 new major initiatives to expand into very close product and application adjacencies around dairy stabilizers, natural mold inhibitors, natural antioxidants and natural ferments. Our playground is large. We play on an addressable market of EUR 8.5 billion in SFS. And the key growth drivers are, as I said, the shift from synthetic to natural ingredients, with a strong clean labeling pool from customers as you've just heard in the Bimbo video. This is also being supported by a more and more stringent regulation. You've all heard about sodium reduction in our diet, of nitride reduction in meat products. And going forward, we are expecting that more and more synthetic preservatives are going to be banned by different states. During the pandemic, food safety has become even more relevant and amplified. The customers' requirements that are extremely strict there because it's about their brand equity, their reputation. When a company is facing a recall because they've had salmonella, listeria or E. coli contamination, this could be very damaging, and we play a very important role to maintain this reputation and this food safety. And finally, waste reduction will play a very important role in helping reduce waste through the entire food chain, from production processes to the retail shelves, down to our own fridges and cupboards. The remarkable point here for Corbion is that we play in the right spot, in the spot that is growing twice as fast as the market. Now discussing about our core competencies in SFS. We have a highly differentiated approach in SFS, starting with our fermentation knowledge, an unmatched portfolio of natural ingredients associated with tailor-made formulation and predictive modeling tool. And this is being rolled out from R&D to application labs and local technical service organizations that are fully dedicated. Let me give you a bit more granularity on that -- this is working in practice. The value we bring, as I said, is coming from the depth of the natural ingredient portfolio there and how do we translate the combination of these various ingredients into different functionalities to serve different markets, being bakery, dairy, snacks, savory and so on. So here in SFS, we are not looking to be the supermarket to the world in terms of food ingredients but to be the best expert in town when it's about natural preservation, when it's about shelf-life extension, when it is about food waste reduction. Our SFS model is built on strong science, on unique ferment technologies. But where we are also adding value is in helping our customers to quickly adapt to changes being market changes, regulatory changes, raw material shortages. So we do that constantly by leveraging our application lab network and our formulation expertise. So we believe our SFS has a higher growth profile and has the potential to reach EUR 1 billion sales by 2030. And we see several levers to continue the growth momentum. On short term, we will obviously leverage our existing capabilities and the recent investments we've made. We will aim to reproduce the success we had in Latin America by further expanding our model through bolt-on acquisitions both in the EMEA and in Southeast Asia region. We are stepping into very attractive and closed product end market adjacencies as natural antioxidants, dairy stabilizers and natural mold inhibitors. So now let me detail a bit one of these adjacencies and the opportunity we see in natural mold inhibitor that has been driving our recent investment in Peoria in the U.S. First, do you know that bread is the second most wasted food product, and that one main reason is mold? But do you also know that today, the most used mold inhibitor is fossil-based? Isn't that crazy? I'm not sure that a lot of people do realize that you have fossil-based products in your daily bread. So there is a clear need there to switch to cleaner label and healthier ingredient. And in that context, we developed at Corbion, a proprietary solution of several food ferments and natural preservative to overcome some of the key functionalities and sensory challenges there, working very closely with key global customers. And we've reached very promising results. So these developments are behind the recent investment we've just made in Peoria, and that will deliver value as from 2023. Additionally, this investment is expected to provide high value and very nice return in the range of 30%. This is a great example of really leveraging Corbion expertise in fermentation, applying the deep knowledge developed in food preservation to functional system and extending it to categories such as bakery and savory. And the similar approach is currently being developed by the team for natural antioxidant and stabilizers. So now let me move on to the Lactic Acid & Specialties business unit. This is another exciting positioning and opportunity. We will start there by sharing a short video about our partnership with MedinCell. So who is MedinCell? MedinCell is listed on the second market in the Paris Stock Exchange. It is a disruptive start-up in the field of slow-release drug delivery using our biopolymer technology to change the lives of million people. So let's have a look. [Presentation]

As you can see, this is really, really inspiring. And these are exciting fields, where we see also a very promising source of value creation going forward. And we're going to have the opportunity to come back on our sweet spot for medical biopolymer later on in the carousel session, but also in my presentation. So now let's move to the LAS business unit and some of the key highlights there. So LAS do represent 34% of our core portfolio, our core sales. And this division has also been growing very fast with a CAGR of 15%, primarily driven by our lactic acid sales to our PLA joint venture with TotalEnergies, but we also have very promising subsegments such as green solvent for the semiconductor industry, lactic acid derivatives for the pharma industry and, as just highlighted, our medical biopolymer business. So today, 53% of our total sales in that division are sold through what we call derivatives. And within our lactic acid, roughly half of our sales are going through the joint venture. Here as well, lactic acid is converted into lactide and then PLA. So these are also derivatives. But there, we recover the value through the joint venture. It's also important to note that this division is also serving a lot of the needs of the SFS division in regards to lactic acid and derivatives for natural preservation. So as I said here as well, a very strong CAGR of 15% over the last 2 years. We've outperformed our initial growth ambition of 7% and significantly gained market share in the lactic acid global market. Now lactic acid sales back in '21 represented 27% of the LAS division. And during that period, we completed a wide [ debottlenecking ] program across our plant network, adding up to 80,000 tons of lactic acid. And we, as you know, initiated the construction of our new circular lactic acid plant in Thailand. So we are now well invested for the years to come. In the Lactic Acid business unit, next to supplying lactic acid to PLA, we aim to continuously drive margin expansion through derivatives in order to create more differentiation, more barriers to entry there. And it has been the case for the 3 high-growth subsegments I mentioned before, the lactate esters for the semiconductor, the lactate [ salts ] for pharma and, obviously, the polymers business. We've also put in that division a lot of efforts to grow our pipeline, again, primarily on derivatives. And as you can see on the chart, we've also increased there the total value by 40%. So now looking to how we are segmenting our product folio in 3 major attractive growth markets. First, the lactic acid to PLA. PLA is one of the few bioplastics available today at scale and with proven functionalities. This is a very large addressable market, and we expect it to grow it at a high rate at 15% growth rate there. But I'm going to come back on PLA in a few minutes. The second is about medical biopolymer. This is a highly specialized business, high barrier to entry as I mentioned, strong IP, strong margins. And the addressable market there is EUR 0.5 billion, growing also very fast at a 15% per annum rate. And in that division subsegment, operational organization and support to growth to grow are in place. And the third is about our derivatives into niche application, primarily pharma and semiconductor. We've been serving these applications for a long time and have high market share there. The addressable market is around EUR 0.4 billion. It's growing at roughly a 4% rate, and the growth drivers in semiconductor are driven by the high digitalization, more data centers, more electronics. You all know what's going on in electric cars, for example. And in pharma, our business is very specific. We are active in the renal dialysis, and there we have also unique, unmatched position. Now what are the core competencies being applied to drive growth in LAS? Starting again with our fermentation expertise, leveraging our global footprint scale and our sustainability footprint. Being the only one global supplier is enabling us to leverage basically our footprint to overcome supply chain disruption, raw material issues, competitive dynamics. And we are on the way to even reinforce that with our upcoming new circular lactic acid plant in Thailand. So let's speak a minute now about this investment in Thailand to see how this is being translated. As you can see on the picture there, we are extremely busy with the construction. Time-wise, we are expected, as anticipated, to finalize the construction of this plant by end of next year, end of '23. And to date, the staff organization is in place and the ready-to-operate team is being trained in our pilot facility in the Netherlands. This new circular lactic acid plant is a game-changing investment for Corbion and the substantial source of value creation, going forward. And why is that? Let me remind you a couple of assets coming from the divestment. First, it's going to be the lowest-cost lactic acid technology in the world. And second, very important, it will be the lowest carbon emission lactic acid process as well in the world. We are planning a 19%, 1-9, lower carbon footprint from cradle to gate versus a conventional lactic acid process. And this will help in different ways. First, it's going to help our customers to achieve their own sustainability targets. It will also help Corbion to achieve our ambitious 1.5-degree target I've mentioned before. But also, it will reduce our exposure to CO2 costs, going forward. So our plan for this unit is to serve both our traditional market as well as the PLA joint venture. Speaking about PLA, let's discuss now how do we see the next steps. We've been discussing in the past about the construction of our second PLA plant in Europe in Grandpuits, France. So where do we stand on this? Together with our partner, TotalEnergies, we are working right now on the final investment decision, the FID. And this FID is expected for the second half of next year as we are expecting a normalization of the CapEx level and the normalization of the engineering cost as well there. The expected commissioning of this new plant would then occur in late 2026. It is also important to mention that the financing of that investment will be mostly financed by the joint venture itself, and we are expecting a similar EBITDA contribution than the first PLA plant for this project. Now regarding lactic acid supplies. This second PLA plant will be supplied from the current lactic acid Corbion footprint over the first years. After this period, and here we speak about really a long period, '28, '29 horizon, together with TotalEnergies, we are in discussion to explore several operational and financial models regarding the future lactic acid requirement for the production of PLA in Grandpuits. Now let's have a look to the recent performance and the business dynamics in PLA. We first need to remind ourselves that this is a great success story with a very strong performance. Think about we're only 5 years after the joint venture inception there. And the inception was in 2017, we started the plant mid-2018. And in '21, we already reached sales of EUR 160 million for an EBITDA of EUR 55 million. The underlying market has strong growth fundamental, and we are expecting sales to reach between EUR 225 million to EUR 255 million by 2025, with an EBITDA range of EUR 50 million to EUR 70 million. As already communicated, we are facing near-term market softness and uncertainty, primarily related to the Chinese downturn related to COVID lockdowns. And as you all know, this is still a very live topic. High energy prices in Europe. This is also still a very live topic and an overall reduced [Technical Difficulty] packaging. This is obviously affecting on near-term our lactic acid sales. However, from what we announced during our Q2 results, we are not seeing today any further sequential decline of PLA sales. In the meantime, together with our partner, TotalEnergies, we are strongly committed to further grow PLA by leveraging our mutual skills and reenergizing the pipeline in a widespread range of applications. So speaking about these various applications, how do we continue to grow this PLA business? As I said, first, by leveraging both parents' expertise: On TotalEnergies, their application and go-to-market strength, just remember they are the #2 global polymer player; on Corbion, our skills in biopolymer technology, our new circular lactic acid plant coming in Thailand and our overall low-cost global lactic acid footprint. And second, we do this by further investing in application. You can see here on the screen a [ few virtual ] examples, for instance, face masks made out of PLA that just got FDA approval in the U.S. a few weeks ago. But the joint venture is also working on a very promising new applications in the areas of fibers, woven, nonwoven, just think about tea bags. You will have the opportunity to discuss in more detail with the team during the carousel sessions about this application. The other priority for the JV is to address the end-of-life options there for PLA. And this is about both recyclability and compostability, primarily on compostability. Starting with the recyclability of PLA, we had two very recent and very important breakthrough developments there, first, around the sortability of PLA. That was an issue. We've developed with Tomra now a reliable technology and a proven technology to sort out PLA in the waste stream, and that's very important. And the second is that we have demonstrated in our own plant, in our own facilities our ability to upscale, recycle PLA technology. So we have the product available whenever the need and the volume is going to be there in the future. The second end of life, and this is a longer-term horizon, is about on compostability. And we strongly believe that PLA in the future can play a big role there. Think about tea bags, coffee capsule, these type of applications. So -- and these projects, basically you will find back in a few minutes in what we are doing in our Incubators. So I will not disclose more there, but these are also part of what we are working on as Corbion to also support and continue to support the joint venture development, going forward. So we believe this is really critical to further work and application to stimulate the project pipeline, reenergize the momentum on PLA. So when now we look at what we believe the market and how the market is going to develop, we believe this market can reach 800,000 tons by 2030, driven by high-growth categories such as durable goods, 3D printing, nonwoven, where PLA does provide superior functionality. So we are highly committed to PLA. We see developing as a differentiated bioplastic with strong and proven end-of-life options and a much better carbon footprint then for [ sale-based ] option. So we see PLA moving into sustainable specialty market compared to mainstream oil polymers, where we can differentiate, where we can maintain premium pricing through solution in combination with other bioplastics or compounds. Now next to PLA, the different type of biopolymer. You've already had a flavor about it. Let's talk about our biopolymer, our medical biopolymer sweet spot there. This is built on similar core competencies around fermentation and polymerization. This is the smallest but fastest-growing segment within the LAS division. And as we've said before, this has been a high growth driver within this business unit. So whether it is through our partnership with MedinCell or through other direct customers, we expect, going forward, a strong CAGR of 15% to reach sales around EUR 70 million by 2025. And this is based on our current 3 focused areas, drug delivery, orthopedics and regenerative medicine. As already said, this is a niche market, but growing very fast, highly differentiated, built on unique technology. And here, again, you're going to have the opportunity to discuss that in more detail during the carousel session. So now let's move to Algae. And as you know, this is our new reporting segment. Algae has been on earth for 3.5 billion years. They have been there, they have adapted to nearly any type of environment. They can almost eat everything. And they make our world habitable and sustainable. Do you know that they produce over 50% of the oxygen in our atmosphere? And today, the number of species is enormous. New species are being discovered every day. So when we look at our own [ livery ], we have over 9,000 strains. This is still very, very minor. There is still so much that can be developed there. Usually, this algae, they only grow with sunlight and CO2. What we are doing at Corbion is that we are cultivating them on large industrial scale in fermenters, saving significant amount of valuable water and agricultural land. Our primary market today is aquaculture. And as an introduction, we're going to see a short video on how we do cooperate in that field with Nofima, the Norwegian food institute. So let's have a look. [Presentation]

So this is a great example of collaboration to improve the sustainability of feed resources. And at Corbion, we remain focused on being part of that solution, whether it is to reduce the dependency on marine resources or to increase the nutritional needs on the fish. So today, our Algae business is primarily focused on omega-3 for aquaculture, and we are now developing in new categories such as pet nutrition. And both categories are growing fast. From EUR 14 million sales back in 2020, the business reached EUR 31 million sales in '21, and we will more than double this year. So we had, since 2020, an impressive CAGR growth of 84% in microalgae. So we have now a foundation to further grow our Algae business as we moved algae omega-3 from niche to a mainstream ingredient for aquaculture. How did we achieve this? Like for any new ingredients and any new-to-the-world ingredient, our challenge was to meet, of course, the key market requirements. First, it was to bring improved nutritional benefits, but it was also to be available at scale, reliable and affordable, of course, being sustainable and at a relatively low carbon footprint. And we've achieved this. Now, algae omega-3 is recognized as a great alternative in the aquaculture industry as a sustainable alternative to fish oil. This was only possible with a superior R&D delivery in Corbion as we developed an optimized algae strain that significantly reduced our costs. And this significant reduction of our variable costs really helped us at the time to close the price gap we had versus fish oil, helped to expand our customer base and grow our volume. So we achieved, as anticipated, our breakeven target by June this year. Now let's see why algae omega-3 is such a promising segment. Fish oil production has remained constant for the last 10 years at 1.1 million tons. But the marine resources are limited and unsustainable. We are already overfishing marine fisheries at 35% and we cannot do more. And in parallel, aquaculture for human consumption is expected to double by 2050. So omega-3 demand is outpacing supply, and algae omega-3 is definitely one of the key enabler in closing that gap. So why is Corbion so well positioned to become a leading algae omega-3 player in a fast-growing market? Today, the addressable omega-3 market is around EUR 3.3 billion and is expected to grow up to EUR 4.8 billion by 2030. Algae omega-3 is today less than EUR 200 million, so still very small but growing very fast. And we are expecting algae omega-3 to further continue to cannibalize fish oil-based omega-3 to represent an addressable market up to EUR 1.5 billion by 2030. So by then, this would represent 30% of the overall omega-3 market. So we are here really positioned in the right spot. Let me explain what are the key drivers behind this growth projection here. You all know omega-3 is a critical nutrient. For human beings, we need to get it from our diet for some animals. And today, the vast majority is coming from fish oil. Aquaculture is obviously one of the most important market, and the demand, as we've just seen, is increasing. So we see strong growth in aquaculture, primarily led by the salmon fish industry but also by the shrimp industry. In addition, the COVID pandemic has boosted growth for dietary supplement because of the positive effect of omega-3 on immunity. And also during the pandemic, you might know that, yes, the pet ownership has increased, and therefore, pet food where also there is quite an attractive market for omega-3. So how do we leverage Corbion core competencies, going forward? And again, here, I'm sounding like a broken record, it's again starting with our fermentation powerhouse and expertise. Second, as I already mentioned, it's about our R&D strength there, built over the years. And we are constantly developing expertise and IP to fuel our strain libraries there. And third is our scale of capabilities and our sustainable manufacturing footprint. The Corbion facility in Brazil, in [ Orindiúva ] sits among sugarcane, it's located next door to a sugar mill. And sugarcane in Brazil used to grow algae omega-3 via fermentation. it's one of the world's most productive sugar sources compared to other feedstock. The sugarcane waste is used as a renewable source of energy to fully power the sugar mill and the Algae facility. So think about a [ hectare ] of land there produce both the fuel and the feedstock to go AlgaPrime DHA with zero deforestation impact confirmed by 20-year satellite data there. This is a very powerful and competitive setup we have there in Brazil. Very important when we speak about customer adoption, if you think what was published over the last month in the press, we see now more and more in the news that feed producers are including algae omega-3 in their formulation. BioMar announced in Feb 22 that microalgae omega-3 were no longer a niche ingredient but a critical part of their future ambition. In addition, Cargill announced that it would use microalgae in all its Norway feed. They stated that a significant part of the fish oil is now replaced with algae oil. So that's also, I think, a great testimony of the value they see in Algae Ingredients. Now let's look forward to the value creation we are expecting and the value drivers for Algae. First, the omega-3 market is increasing with 20,000 to 40,000 tons per year only in aquaculture. We've, as you can understand, have initiated and strengthened collaboration with multiple partners to secure future business. Second, and going forward, we see a major opportunity in higher-margin omega-3 market in human nutrition. So we are expecting to reach full capacity in [ Orindiúva ] by 2025, and by then, we would expect our sales to be around EUR 140 million with an EBITDA margin of EUR 25 million being accretive to the overall Corbion EBITDA. As a conclusion on Algae, how do we unlock and how do we intend to unlock value beyond omega-3 in aquaculture? As I just mentioned in the previous slides, there are many market segments where the demand of omega-3 solution is growing, including human nutrition, pet nutrition and feed. So as a first step, what we're going to do, and this is from 2023, is we're going to move our algae omega-3 in the vertical segment into new categories as pet nutrition and human nutrition. And we are expected to see value as from 2023 there. This will enable us next year to move from a breakeven situation to profitability -- to sustained profitability. Beyond '25, we are working within our Incubator to expand our Algae portfolio, omega-3, but I will come to this in a minute. And this is more about the horizontal move you can see on the slide. Now moving to the Incubator. Let me focus on the exciting initiatives we have behind our Incubator. But before -- to turn things into perspective, when we speak about Incubator, you really speak about longer-term project. And speaking about microbes and long term, I was last week visiting ARTIS and the Micropia Expo in Amsterdam. And I found a great sentence there, which basically it was translating, if you think about when earth did appear 4.6 billion years ago, if you would move that back to a calendar year, so microbes did appear in February. Only in November, the first sophisticated animals like worms did come in. Mammals just arrived mid-December. And you know man, we did arrive 31st of December, just 10 seconds before midnight. So again, when you speak about microbes, when you speak about time length, I think it makes us think about -- sometimes it takes a long time to incubate. But when you see the outcome, and we have several very positive outcome you can see on that slide, the initiative we just discussed, algae is coming from that process. PLA is coming from that process. Our new lactic acid circular plant has been incubated for 12 years and is now coming into reality. And obviously, we had to get and to kill a few projects. You might remember our [ biosuximic ] joint venture. More recently, the [ FDCA ] bioplastic initiative we decided to kill. And that's okay. So what I mean we have in there is our mid- to longer-term projects that we are incubating, but we are applying now two things very differently. First of all, everything we have in our Incubator are really fully aligned with our core business, with the 3 BUs. The second is that we apply a very strict filter, looking first on our alignment with the 3 Sustainable Development Goals as I mentioned before, and 100% of these projects do have to fit behind these goals. Obviously, we also screen very carefully and strictly the match with our core competencies and the value creation potential before we let everything in. So now let's have a look to the areas we are focusing on. We have 5 major areas there, 2 existing initiatives: one is the Algae portfolio extension as just described in the Algae section, and the second is the biopolymer. And specifically there, we are developing new co-polymers, be it for our medical biopolymer business or, as an example, to improve own compostability of PLA as these are built on similar core competencies. And next, we've added 3 new initiatives. Natural preservation, you understand this is one of our largest, if not the largest, business for Corbion. And we are working in there more specifically on novel food antimicrobials, novel mold inhibitors to support the future growth of SFS. The second one is around circular raw material. And what does it mean? We are not looking ourselves to create new generation feedstock, but the ability to have the right microbes, the right bacteria, the right microalgae strain, able in the future to process cellulosic sugar, new second-, third-generation sugar is essential there. Even we are working, and this is really upfront, on microbes that could eat CO2 with some partners. So this is quite an important one. It's a longer-term shot, but it's a crucial one for the future success of the company. And last, but not least, is around net zero. But what is in there, because net zero is wide and generic. Just mentioned the success we've had on our new circular lactic acid technology. Here again, we are really specifically looking on new technologies to really help us reach our 1.5-degree ambition by 2030 and reach our very long-term CO2 ambition to become also a net-zero company. So we have really some exciting projects there, and you will have the opportunity to discuss this with Marcel and the team in the carousel session. So now to end my part, let's go back a minute to the key highlights. We are strongly positioned for the future. So we made a few strong announcements today. Now let's put that into financial context, and let me give the floor to Eddy to go through the details of it. Eddy, the floor is yours.

Thank you, Olivier. Good day, everybody. So following Olivier's strategy update, it's now my turn to take you through the financial implications thereof. And before looking to the forward, what's going to happen, it's always a good practice for us to look to the past. So how did we perform? How did we track against the targets that we set ourselves 2 years ago with the advance of Advance 2025? Basically, at that stage, we had two key targets set ourselves, both for the core activities. One is related to the organic net sales growth and the other is about the EBITDA margin delivery. So let me start to take you through those first. So when it comes to the organic net sales growth, we have clearly outdelivered, outperformed our Advance 2025 targets. On this graph on the left side, you see that we have been growing the business, this is the total core portfolio, by an average 8% per annum. And that 8% is really looking only at the volume and mix component of the sales growth. So that's expressed in the blue bars on the left side. On top of this volume and mix developments, we also had very strong sales price increase developments. And especially in the last 2 years, you see that being added to the volume and mix effects. We've been growing the whole business organically in the pace of 15% to close to 25% in the last 2 years. So really a very nice growth delivery. And the nice thing about this, by the way, is that this is being carried by all the different units in the core. So it's true for Sustainable Food Solutions, for Lactic Acid & Specialties and also the algae-based omega-3 business. In a challenging macroeconomic environment that we have been faced in the last 2 years, we are very happy that the EBITDA has been growing from a level of EUR 122 million in 2019 to a level of EUR 150 million in this year. But despite this growth, the reported EBITDA margins have been adversely impacted by the high input cost environment that we've been faced in the last 1.5 years. And basically, what has happened in the last 1.5 years, we've been faced with an unprecedented level of higher input costs. So this was really from packaging, raw materials, energy and freight of an amount of EUR 190 million. And the good thing is we've been able to pass on this EUR 190 million in increased sales prices, but we did it on a dollar-for-dollar basis, and that means the margins has been diluted as a consequence thereof in the range of 2.5% to 3.5% in the last 2 years. So if you would eliminate for that margin dilutive impact, basically underlying in the last 4 years, we've been developing the whole portfolio for the core activities in the range of 15% to 16%. So that's being expressed in the purple line in the graph here. So -- yes, one more thing on this one. So given this high volatility on the input cost environment, we really believe that EBITDA margin is probably not the best metric to measure our performance against going forward. We think it lost part of its relevance. So going forward, as you will see later on, we will change this metric as the key measurements for our performance in absolute EBITDA growth. With Advance, in addition to the two financial targets, we also had a whole set of underlying ambitions, as we call that. So basically, if I take you through there, so indeed all about the sales growth for the Sustainable Food Solutions, we've been growing this business close to 13% over the last 3 years, while the underlying ambition level was 3%. For Lactic Acid & Specialties division, we've been growing at very close to 15%, while the underlying ambition was 7%. And Algae Ingredients, of course, we did not set growth targets yet. But as Olivier has already shown, we've been growing the business at 84% in the last few years. We're also very happy that we have indeed turned the algae omega-3 business into positive territory with a [ breakeven ] point measured at the EBITDA level as per June this year. And we also continued to invest in the other Incubator initiatives in the range of 0.5% to 1%, so very much in the target range that we had in mind. And at the bottom of the sheet, you should also see that the ROCE development has been pretty nicely with 11.3%, measures of 2020 and 2021, so over 2 years. And that has been above our WACC, above the cost of capital, which was about 7.5% over those 2 years. So when you look at the whole scorecard, I would say, there's only one odd one out. And that's really the CapEx program, our investment pace. Those, you see, have been more intense than what we had in mind 2 years ago. And there are basically two key drivers there. One is about, again, inflation environment. I think about higher steel prices, higher contractor rates, but also more difficult to organize everything when you're building new plants at the moment because of all the COVID disruptions, the planning, the replanning, get your material on time. So that all came to a higher cost level than we anticipated when this would have been happening in non-COVID times. And the second element is, of course, all about the growth opportunities to support this business growth both in the past years. But also going forward, yes, we did step up our investment pace. So that is the second driver why the CapEx program came out higher than what we anticipated earlier. So this gives you an overview of a flavor of 4 case studies of the investments we're making. So we have -- to support our business, we have lots of initiatives, lots of projects, investment projects, each turning in high levels of returns. And when we talk about returns, the key metric that we use there is post-tax IRR, internal rate of returns. And of these few case studies, if you look a bit on the left-hand side, when it comes to greenfield investments, so major new investments on sites, EUR 100 million and plus. Then basically, there, we see IRR profiles, again post tax in the range of 15% to 20%. And when it comes to incremental investments, so expansions, smaller expansions on an existing infrastructure, so that's typically a 5, 10 or a couple of tens of millions per project. There, you see really higher return profiles from 20% and, in individual cases, even up to 100%. So this is the kind of investment space, how we can further support and did support our business. . So let's now look forward. So like I already stated, EBITDA growth is going to be one of our key financial metrics. And based on all the nice growth opportunities that Olivier already took us through, through his presentation, we are very excited and also confident about the high EBITDA growth potential that we see in further developing our portfolio. I've even identified a clear visibility on a pathway to increase our EBITDA by about EUR 100 million in the next 3 years. So coming from the EUR 155 million of this year, 3 years from now, we see our business growing to an EBITDA level of EUR 250 million. And let me talk a bit to that EUR 250 million on the right-hand side because this is only looking at the core activities. So this excludes the EBITDA contribution that we currently still have from the noncore business because we're going to divest that, as has been already discussed. The EUR 250 million, by the way, is also excluding our 50% share of the EBITDA in the joint venture of PLA. So if you would take a proportional consolidated view, then you can add another EUR 25 million to EUR 35 million EBITDA on top of this EUR 250 million. And the third thing I'd like to mention is what's expressed at the yellow dot over there, is that this EUR 250 million target is really a step-up from the implied target that we set ourselves 2 years ago because at equal currencies, then we would come out with about a EUR 40 million lower level. So it's a real step-up versus the original target. So let me take you through a couple of the key drivers how we see this pathway being filled. Basically, it starts on the left with some cost-saving initiatives we've identified. So this is about EUR 20 million of the EUR 95 million increase coming from that. And the first part is about the lactic acid plant that we're currently building in Thailand. This will be our lowest-cost lactic acid plant. And the moment that, that plant is becoming operational towards the end of next year, we will make sure to fully utilize that as quick as possible to capture those savings. So that is going to be one contribution. But that's not the only thing that we can do on cost savings. We have a range of products that we currently buy from third parties. We in-source -- we outsource that. And what we can do with some investments, in-source those products and, again, capture the savings. And a nice thing about that left part is that we are not dependent on further business growth because this is already based on the existing level of activities, the level of business that we have and that we can capture in this way. So that brings us down to the middle section there. It's all about business growth. And basically, you can see in all different components, the EBITDA contribution will be there. So Algae, now that we've broken through the breakeven position, of course, there, does not stop. We will further ramp up the development of that business. So that will give us a good EUR 20 million extra EBITDA over the next 3 years. Lactic acid to PLA will also contribute about EUR 10 million of EBITDA for the next 3 years. And then the remainder EUR 50 million, that's all about growth in the whole Sustainable Food Solutions area and also the lactic acid business, excluding the lactic acid for PLA. And again, it's good to remember, this whole business growth is coming from volume growth plus mix effects, positive mix effects from products. And what we mean by that is we have been improving in the past, and we will continue to do so that we will grow in our total portfolio, the higher value portion of our business at a higher pace on average than the lower value portion of the portfolio. So it's volume plus mix effects. Then on the right-hand side, the third driver, but that's done from an investment perspective. With this EBITDA growth delivery, we can allow ourselves to step up the innovation -- long-term innovation pace by about EUR 5 million towards the end of this strategy period. So this gives you an overview of our pathway to a EUR 95 million increase in EBITDA. So let's talk a bit about capital allocation. I really want to say here that the whole capital allocation discussions is in a framework where we're going to improve our key funding ratio. And the key funding ratio is covenant net debt over covenant EBITDA. And that ratio, we are going to drive to a level of 1.5 to 2.5x. And in the later sheet, I will show you how quickly we will get there. When it comes to prioritization of capital, the sequence of that did not really change. So it starts indeed about our CapEx programs to support the business, support business growth. It's good to see that 2/3 of that CapEx program is all about investments behind growth. And the second priority then comes with our dividend policy. We leave it unchanged. So that is a cash dividend, stable to gradually increasing cash as an absolute amount per share. And the third [ bucket ] is about bolt-on acquisitions. So we will continue to look for opportunities to further support our strategic objectives by making bolt-on acquisitions. And a couple of examples, like we did in the past, is indeed the acquisitions we did both in Brazil and in Mexico related to the functional blending business. And then in a situation of excess cash, we will not shy away to redistribute funds back to shareholders, and that can be done in a share buyback program and/or special dividends. And that's also something that we have done in the past. For those of you longer with us, we did that also in the period 2013 up to 2017. But again, all in a framework where our key funding ratio will trend between 1.5x and 2.5x. So let's take a slightly deeper dive on that first [ bucket ], our CapEx program for the next 3 years. So in the next 3 years, like I stated, we see very good growth momentum, which has to be supportive of investments. So in total, for the next 3 years, we are looking at a CapEx program of EUR 475 million, and 2/3 of that is fully geared on growth. So a couple of components there. On the top right-hand side, you see EUR 60 million is all to do by completing the existing new builds that we have for lactic acid in Thailand. So the EUR 60 million to be spent to complete that plant before it becomes operational. Then on the bottom right, you see another EUR 260 million of expansion CapEx, and that is really to support all our different businesses. You see some kind of dissemination of that on the top left side, how it's nicely spread on the different business areas and some examples of that. And then the remainder of the CapEx program, we call it maintenance, and it's EUR 155 million. And with maintenance, we mean anything not being expansion. So yes, it is about keeping our assets in a good shape. It's maintaining the assets as to reliable supply our businesses. It's also about the safety investments we have to make or compliance investments. So that's all in the maintenance bucket. Then I also like to pay a bit attention on the longer-term projects that already Olivier was talking to. So yes, PLA2, we expect to make a decision on the second PLA plant in France by the second half of next year. But I'd like already to share with you that the moment that, that happens, the majority of the funding of that plant will happen by the joint venture itself. The joint venture has matured now to such stage that it will be able to capture funds on its own, that's called nonrecourse funding, so that's funding. And that means that shareholders will have to come in with much less funds than it was the case with the original plant. And the second thing is about lactic acid's requirements to feed such a plant. So the earlier years, we can supply lactic acid out of the existing supply chain. But there comes a time that we also need to invest in a lactic acid plant in Europe. And there are a couple of things to be mentioned on that. First of all, this will be beyond the strategy period. This will be after 2025. So this is not imminent. And the second thing is once you enter in investments like that for a new plant, you always talk about a multiyear investment period. This doesn't come in 1 year, normally it takes about 3 years when such an investment takes place. And the third element related to this plant is what has also been shared in the press release, that we are in discussions with Total to further explore several financial and operational models when it comes to the lactic acid requirements for this new PLA2 plant. So I just wanted to leave that with you. This gives you more connotation on when those investments will take place and how large it can be. So let's talk a bit about the funding ratio. So again, given the challenging macroeconomic environments in the last 2 years, yes, our funding ratio has run up to above [ 3x ] levels. And it has peaked in June, as we've shared also then, to a level of 3.3x. But we are very committed to improve this funding ratio with the following pathway that has been depicted here. Already by this end of this year, we will have brought back, we would have improved this ratio back to a level of 2.9 to 3.2x. And then next year, we will see another improvement to a range of 2.5 to 2.9x. And then from 2024 onwards, then we are in the guidance range of 1.5 to 2.5x. And that full EUR 475 million CapEx program of the previous sheet, is already in these projections. And one other good thing to mention here is that the divestment process, once we get the proceeds of the divestment of the emulsifier noncore business, those proceeds have not been even taking into account in this improvement pathway. So there will be a further acceleration in this trajectory. I also would like to pay attention to our debt structure. We have a very solid and good debt structure, I would say. Duration, about 5 years. The first redemption on our loans has to take place in 2025. And so nothing to be done in the next 2 years. And also, interest rates, 2.2%. It's not something you can get your money at these days anymore. So very good interest rate levels. So now we come to the group segmentation. As Olivier already alluded to, basically, we make two key changes to our group reporting structure. The first one on the left is based on the commercial success of the omega-3 algae business. Now it's time to carve it out of the Incubator and give it its own position as a business unit and also as a new reporting segment, and we are going to call that indeed, Algae Ingredients. So going forward, you will see 4 reporting segments: Sustainable Food Solutions, Lactic Acid & Specialties, Algae Ingredients and then, of course, also the Incubator. And we also continue to grow the transparency on how the joint venture is developing in terms of reporting. And then the second change is to be found in the noncore. So yes, now with the decision to divest the emulsifier noncore business, obviously, we have now moved it out from a manage-for-value perspective to a manage-for-exit perspective. Looking at the future guidance. So this is the new overview. In the middle, you see the previous guidance; on the right-hand side, the new guidance. The structure of our guidance framework is very much the same. So we will continue with two financial targets being supported by underlying ambitions. The two financial targets, the first one is about organic net sales growth again. We came from a 4% to 7%. We have up at now to 5% to 8%. There's one twist to that, that how we measure the sales growth, going forward, is a bit more narrow because that's only based on the combination of volume plus mix. So any price effects, and it can be up or down, going forward. Nobody knows in the current volatile environment, that is left out of the 5% to 8% ambition level per annum. Second metric is the new one. That's the organic adjusted EBITDA growth. So there, we are guiding for 15% to 20% growth per annum, and this all relates to the core, as I explained before. And the EUR 250 million you've seen on the earlier sheet is the midpoint of that range. So that sits at the 17.5% growth. You can do the math, then you'd come very close to the EUR 250 million. Then the underlying ambitions, like I said, on the growth. So for the Sustainable Food Solutions, we will increase from 3% to 5%. When it comes to Lactic Acid & Specialties, we leave that unchanged. And Algae Ingredients as a new unit, we are there having an ambition level to grow that by 25% per annum, going forward. Of course, the breakeven is not a target anymore for Algae Ingredients. That's already achieved. So the continued investments in the Incubator will remain in the guidance range of 0.5% to 1.5% of our core Corbion sales. And also the underlying ambition for the core, we did not drop that. Although it's not a financial target anymore, we still have that as an underlying margin ambition being above [ 17% ] by the end of the strategy period. So we will leave that unchanged. CapEx program, the EUR 475 million for the next 3 years. On average, that translates back to EUR 160 million per annum. And then the covenant net debt ratio, like I said, we came from guiding for 2x and then at peak, when you're building a new lactic acid plant, to 2.5x. We've more simplified it now and, say, let's apply a range of 1.5 to 2.5x. And we will continue to drive the whole portfolio with ROCE level above the WACC, above the cost of capital. So with that, I give the word back to you, Olivier.

Okay. Thank you, Eddy. So this is concluding our morning presentations, and I'd just like to summarize in terms of some of the key messages we've been through together today and before moving to Q&A. So firstly, we've made the significant progress in Advance 2025, despite the challenging macro environment. Secondly, the creation of Algae Ingredients in a new business line reflects the achievement of the breakeven by the Incubator business within our targeted time frame. The organic growth prospect for the core operations have improved to the extent that both our net sales growth guidance and our EBITDA growth target through to 2025 have increased. As you heard from Eddy, such developments have also facilitated an expected reduction in the debt EBITDA to below 2.9 in '23 with a range of 1.5 to 2.5 thereafter. And these ratios do not include any further potential benefit from the initiated emulsifier divestment. Now I'd like to open to Q&A session, and Eddy and I are happy to take any questions from these morning discussions.

Patrick Roquas from Kepler Cheuvreux. And a couple of questions. First one is on your targets, which I think seem to be quite ambitious when it comes to the 15% to 20% EBITDA growth per year. So the question is, does it also assume a certain level of price stickiness when raw mats come down? And second, is it a bit backloaded because the contribution from your new LA plant will be in more like '24, '25? That's the first question.

Yes, maybe I can take that one. So yes, price stickiness in a situation where input costs would come down again, that's always something nice to have, and that can further contribute to this. It's not really dependent on that situation. So with also existing pricing structures, that target will be achieved. When it comes about backloading, at [ 98, 95 ] growth in the EBITDA, that is not something that will happen only in the year '25. This already happened across all 3 years because one component, the lactic acid contribution of [ EUR 10 million ], that is a small one of the total growth. And like also Olivier has been sharing in his overview, if you look at the Algae EBITDA, so yes, we will see a nice step-up in the Algae EBITDA delivery [ rate ] next year.

Then on PLA. Yes, the discussions and the exploration of different scenarios with your JV partner, I assume this has to do with, let's say, that you want to kind of invest less CapEx in LA for PLA, going forward. Is that fair to assume? And then second, if I look at the targets for the JV for '25, and it seems to include a lower margin between 23%, 27%, I think. Is that right? And what is driving that lower margin versus what we expect for this year?

So I might take the first question and Eddy will have the second one, Patrick. Yes. So the discussion we are having indeed with TotalEnergies is really to explore how an eventual second lactic plant would be set up. So what we are doing now is really, I mean, exploring any type of options, indeed, to say that as we still strongly believe altogether that PLA will continue its growth path. So as we are growing that business, the model we had initially in Thailand in the time of 2017 when we build the plant has to evolve. So this is exactly, I mean, what we are discussing now. We are still in the early stage of that discussion, so we cannot disclose more at that stage. Do you want to comment on the...

Yes, on the margin, I think your observation is absolutely right, Patrick. Indeed, we came from margin deliveries of the joint venture, which was quite -- yes, I'd say, at high levels, above -- way above 30%. If you look at this year's halfway, it's already in the last quarter, it was close to 26%. I think we have to more think about the PLA joint venture margin development in the range of 20% to 30%. So I think that's a better range to look at than the way above 30%. And one of the key drivers is there the spreads between PLA prices and input costs, and input costs is very much driven by the lactic acid that we supply. And that's, again, dependent on the sugar price. And there's no direct coupling between PLA prices and sugar prices. So you will have periods where margin expands, which have been the case, and there will be periods where margin contracts again. So therefore, I think it's a safe assumption to take this slightly wider range of 20% to 30%.

Wim Hoste, KBC Securities. Also I have two questions, please, if I can. The first one is on PLA. Can you maybe update on your efforts to find new contracts to kind of bridge the problems you have in China and other -- the other reasons that were previously mentioned? And the second one is on the contribution from the new lactic acid plant. If you look at the slide showing a kind of step down in cost of units, which was pretty impressive or pretty big, and then the contribution that was mentioned in the EBITDA bridge of like EUR 10 million, it's not that big versus the slide with the cost reduction per ton. Can you maybe help us understand what is driving that difference?

Yes. So first, on the PLA pipeline, the immediate things we've done already a few months ago is really to add up our go-to-market capabilities in terms of feet-on-the-ground sales but also application. When I spoke earlier about leveraging the parents' set of skills, it's also about going into new applications and more differentiated application. So instead of necessarily focusing on plastic packaging or plastic bags, for instance, that was one of the big important markets in China, is going into more specific categories as durable goods, nonwoven fibers type of application. On this, we have a great advantage. We are leveraging TotalEnergies assets. They have two major application centers, one in Belgium, one in Houston in the U.S. And this is what we are doing more of now. And -- but obviously, it takes a bit of time to reenergize that pipeline, but we see the first effect that -- yes. So this is what we do really. So more feet on the ground, really a lot more focused on application and on new application to reduce exposure to packaging type of application into other categories. Eddy, do you want to take that?

Yes, a question -- and I know this question was going to come, by the way. What I try to do in the bridge is really from a development risk perspective to separate cost savings versus business growth dependency. So on this lactic acid plant, the new lactic acid plant, it will contribute in both areas. So when it comes to cost savings, it really means existing lactic acid that we make on an existing plant. If we replace that tomorrow by being produced in this new plant, that is where the first EUR 10 million of savings are coming from. So it's not an extra lactic acid molecule that you produce in that sense. And on top of that, of course, you get business growth. So that will give another contribution of the lactic acids and the growth of lactic acid demand, going forward, and catering all the different businesses that we're growing. That contribution is part of that EUR 80 million of the business growth. And that is something that we've given, I think, some indications earlier on the investment level of this plant IRR. You've seen in the presentation, it's at 15% for this plant. It's also mentioned on the CapEx sheet. So I think you can do the math yourself of then the total EBITDA contribution will be.

Yes. It's Fernand de Boer from Degroof Petercam. Eddy, could you also say something about the expected free cash flow? Because quick and dirty, I think you are generating some EUR 630 million EBITDA in the coming 3 years, but EUR 475 million of CapEx. So a limited space for really free cash flow. Working capital has been an issue in the past few years. So could you say a little bit about that? That's the first question. . Then on the PLA, going forward, because you say, okay, the market is growing, but so is capacity, it's also growing. So what assumption are you making for the very healthy price of PLA at this moment? Then a third question on this also on PLA. Could it be a scenario, because you say in your press release also, "We remain committed to PLA."? But if you look very, very long term, you could say PLA becomes a commodity. So could it be a scenario that you say, okay, at the end of the day, we let PLA go to Total? And then on the Algae, going forward, how much of the Algae business has to come from human nutrition and also from pet food? Any idea about that? .

So Eddy, do you want to day the cash flow, and I'm going to take the PLA questions?

Yes. I take the cash flow. So Fernand, yes, we came from a period back in 2021, about EUR 95 million negative free cash flow. This year, first half, minus EUR 70 million, so you can do the extrapolation what will be the free cash flow this year. With these projections, the cash flow for next year will be much less negative than it was in the last 2 years. Whether we'll reach the breakeven, that's to be seen because there are lots of elements making up the cash flow, as you know. But these projections -- clearly, the free cash flow amounts that you've seen in the last 2 years is not what we will see going forward.

But in your assumptions, do you expect then some improvement in working capital? Or...

Yes, some. But within working capital, let's take inventory out of that. So in the last 1.5 years because of this high inflationary cost environment, the inventory component in the working capital has gone up by about EUR 125 million. And that's been caused by 3 more or less equally sized components: so higher currencies, price increases, so more expensive kilos; and the third one, which we really can influence, and that is about more kilos. So that's basically the physical stock. Now the last component, say, about EUR 40 million increase, part of that we do expect to reverse, especially when the global supply chains are becoming more smoothly. But I would say, at the same time, you see the general industry, I think we do not go back to the period where we go for very just-in-time deliveries anymore. So you will see, in general, a slightly higher safety stock levels in volumes than the periods where we came from. But yes, some recovery of our new capital inventory positions will take place.

Yes. On PLA, indeed, I mean, there are some new capacity being announced, but if you think about the major one, the one coming in Thailand from our competitor is expected to come by '25, so late in this strategic period. The next one, when -- if you remember, we've discussed in the past about some of these projects in China, many projects that were announced a couple of years ago. Many of them, if not the vast majority, are on hold these days. And even more, the couple of existing players or -- that did put capacity recently are right now mothballed. So they are not running for different reasons. Obviously, the main reason is that the current lockdown situation, but there are also some technology reasons behind. So yet, we are expecting more capacity to come. This will be probably in the '25 and later. This is where we expect more capacity to come. So we are expecting, of course, a recovery before that on our side. But about this growth momentum on PLA with the categories we're working on and the pipeline we are creating, yes, we have short-term issues. But we also have nice perspective on the market growth fundamentals. So we are one of the few bioplastic available at scale, but moreover, I think the right functionality. So on that one, when the market comes with more capacity, obviously, we are not the only one creating the market. This is a market we are creating. And on the back of, as we've said, different end-of-life options, home compostability is one. Also think about the issues, the fossil-based do have -- currently, if you think about polystyrene, we know polystyrene is also being replaced quite a lot because it's so difficult to collect and recycle. And this is the product, the fossil-based product, we compete the most with. So this, we expect also will open quite a lot of new opportunities, going forward. And these are big markets. So that's, I mean, again, I think, indeed, more capacity coming up but to a much, much lower extent than what was anticipated a few month, years ago with all these Chinese announcements. So on Algae, going forward, you might remember that over the last quarters, we discussed about some important debottleneck/upgrade CapEx in [ Orindiúva ]. At the time, we discussed about the famous project we called the Flex project. And the name says it all. It was, of course, to further debottle the capacity but also to increase the flexibility of these plants. And what we've done, both in the R&D side and in the plant, is create the ability for this facility to also produce products that could go to pet nutrition and pharma -- human -- sorry, and human nutrition. So -- and the last months have been very important for us to prove our process, to prove our model, to qualify our products into the market. And so we are ready to go in '23 on this. So we are feeling pretty comfortable in terms of getting into these new categories for omega-3 as from 2023. Yes. Does it answer your question? Yes. There is a question behind you, Peter.

Yes, I know. This is the last one, then we do lunch. I saw also there basically fingers being raised. There will definitely be a Q&A later on after the carousel expert. So we do the last question now, and then we will have lunch.

Alex Sloane from Barclays. A few questions from me. In terms of the growth ambitions, I'd be interested, to what extent you've built in downside risk to the global economy in '23? I'm thinking, in particular, Sustainable Food Solutions, where maybe some of your premium natural preservatives, which are more expensive than the synthetics, maybe could be at risk if there's trading down in the end markets. So interested in your view there. And just on PLA, can you speak to the visibility that you have in terms of the recovery that you're expecting? Will that come already in 2023? And then just finally, just in terms of the emulsifiers. So obviously, you're announcing that publicly today that that's your strategy. I'd be interested how much work has already been in process maybe privately. And then therefore, can you give any indication in terms of the timeline to expect here?

So I will start with emulsifier because, obviously, as you understand, these are quite confidential processes and questions. So the thing we want to communicate about is that the process has been already initiated. So we are busy with it. But obviously, we will not commit today on the timeline. So we expect this to happen in the course of '23. But that's the only thing we would communicate about it. In terms of fear of recession, obviously, we read -- back to the question on SFS. We read everywhere this fear, and we've seen also some of our peers discussing about that. The fact is that so far in our business, we don't see it. So we still have a sustained business. Obviously, yes, we always have risk that some products will be replaced. But what we can see as well is that it also creates opportunity for us. We mentioned sometime how do we overcome some material shortage or high [ payer ] inflation. We have a few examples where -- to the example during the Q2 results of vital wheat gluten, which is very short today, very expensive and where basically we had an approach with many customers to replace vital wheat gluten with enzyme cocktails. And actually, these are pretty high-margin products. So, so far, yes, it could come, honestly, and nobody knows what's going to happen in '23. It's still very uncertain and very volatile. But the things we can do is we can do two things. We can continue to really work on our pipeline because this is -- and this is why it's so important, and I want to highlight that this is the future of sales. The pipeline you see now that we've developed over the last 18 months are sales of '23 and '24. And this is not something you just change overnight. And this is why in the 3 divisions, this is one of the primary focus and we discuss very regularly with the [ 3BU ] president the health and the size of the pipeline. So that's number one. So on the pipeline, we are feeling pretty confident. Now what's going to happen out there, we just don't know. What we know is that when we compare to the previous crises, '08 and before, our business is quite resilient because we -- and this why I've said the 75% is in food and pharma, and these are the last things you get. And the same thing is valid for within food, bakery and bread, which are two important categories. So we believe we have a [ reasonable ] model. I wouldn't say we are immune, we are not. So -- and I would answer a bit on the same line on PLA because we are now -- obviously, we came from a kind of almost sold-out situation. We were hand-to-mouth to this impact primarily coming from China. And yes, we didn't have the pipeline we needed because -- also we didn't have the product and no excuse. So now it's a good time. We are still in so much the early days of that JV that now it's the good time probably to reassess, and this is what we've done, the focused categories, where do we want to put our efforts in terms of application growth to build something that will not be just for '23 but for the next 18 to 24 months in terms of pipeline. Because the dynamic is exactly the same. So yes, we are really running full gear on PLA to reenergize that. But yes, I would not comment at that stage when the upturn is going to come. Yes. Yes. So I think we need to close. So I would indeed thank all the people that are on the webcast. We're going to close the call now. What we will do before going to lunch is just a bit of housekeeping on how we're going to work later. Basically, we have these 4 carousels. So I would suggest that this part of the room would stay where we have lunch, where we're going to have 2 carousel. And the left part going to come back here. And then we will rotate that everybody can have a chance to go through the 4 sessions. And after that, we're going to reconvene for a much wider, and we're going to have more time with a Q&A, where you will have the entire ExCo on stage here together with me and when you're going to be able to ask any questions to the team. Thank you a lot for the attention, and see you in the lunch back.